Hong Kong fashion firm Lever Style identifies fund linked with Alibaba founders as cornerstone IPO investor in digital push
- Poolside Ventures is a fund managed by Blue Pool Capital, which invests personal wealth of Alibaba founders Jack Ma and Joseph Tsai
- Fung Group, parent of 113-year-old consumer goods supply chain manager Li & Fung, to dilute stake to 14.4 per cent from 21.9 per cent as part of listing
Lever Style, a fashion supply chain manager whose heritage dates back 63 years to a shirt factory in Hong Kong, has enlisted a firm linked with the founders of e-commerce giant Alibaba Group Holding to become a cornerstone investor in its initial public offering, which is expected to raise up to HK$195 million (US$23 million).
Poolside Ventures – a fund managed by Blue Pool Capital, which invests the personal wealth of people including Alibaba founders Jack Ma and Joseph Tsai – will buy US$4 million worth of Lever shares for a stake of about 5 per cent, according to its listing prospectus, which was published on Thursday. Alibaba owns the South China Morning Post.
Lever’s move is in line with its strategy to pursue more business from so-called digitally native brands.
Fung Group, the parent of 113-year-old consumer goods supply chain manager Li & Fung, which first became a strategic Lever shareholder 12 years ago, will sell 12.8 million shares through its unit Fung Investments as part of the IPO. This will cut its stake to 14.4 per cent from 21.9 per cent.
“While the Fung family is still involved and is supporting us as a shareholder, since our business has been transforming, to the point that e-commerce operators account for half of our business and will keep rising, I want to find new strategic investors active in the e-commerce space during the IPO process,” Stanley Szeto Chi-yan, Lever’s chairman, said in an interview.
Lever was founded in 1956 as shirtmaker Lever Shirt by Richard Wai Szeto, Stanley Szeto’s grandfather, during the golden age of Hong Kong’s manufacturing industry. Production was moved to Shenzhen in the 1980s, and at one point Lever had more than 7,000 workers in three facilities. These were sold in 2016 as Lever transformed into an asset-light supply chain manager.
The company’s listing comes about two months after it started to be affected by a 15 per cent import tariff on mainland Chinese-made garments destined for the United States.
Szeto expects Vietnam to become the company’s largest production base for the whole of this year, replacing China which accounted for 52.6 per cent in this year’s first four months and 66.6 per cent for the whole of 2018. Besides Cambodia and Indonesia, Lever is also looking at manufacturing partners in other parts of Southeast Asia and South Asia, he added.
Net profit at Lever, which supplies brands such as AllSaints and Theory, fell 21 per cent year on year to US$1.38 million in the year’s first four months. If non-recurring expenses related to the firm’s IPO of US$0.8 million is excluded, net profit would have risen 26 per cent year on year.
Its profit grew 44 per cent last year to US$6.46 million from 2017.
Li & Fung cuts China’s role in supply chain, shifts sourcing to cheaper markets
Lever plans to use the listing proceeds to acquire companies with product know-how to help it broaden its product categories, and strengthen its digital tools to shorten delivery times.
“Traditional manufacturers grow profit by making huge volumes of a small number of items at high productivity. But in the e-commerce world, being able to quickly produce small quantities of many customised products is key,” Szeto said.
“We deploy technicians in factories and manage the information flow to enhance the efficiency of materials procurement, samples creation and production processes, so as to shorten the product development lead time.”
